RCN to Launch Gigabit Internet Access in Chicago Market

RCN, a provider of triple-play services to some 377,000 customers, will sell gigabit Internet access services in its Chicago market, including the communities of Skokie and Lincolnwood, using DOCSIS 3.1 technology. Pricing will start at $70 a month.

RCN began life as a supplier of triple-play services primarily to high-rise and other multiple dwelling units in a few Northeast U.S. cities, and now is owned by TPG, a private equity firm.

TPG also acquired the assets of Grande Communications, an overbuilder operating in Texas.

Like privately-held WOW, TPG operates as an overbuilder, competing against both other cable operators and telcos in the consumer and business customer segments. WOW has something more than 700,000 customers.

Though both WOW and TPG have accounts two orders of magnitude behind the top-tier service providers, WOW now ranks about 10th on a list of largest triple-play providers, while TPG ranks 12th.

After a recent wave of mergers, the leader board is vastly changed. Perhaps most surprising, for many observers, is the fact that AT&T now is the biggest supplier of consumer video services.

By way of comparison, AT&T has 26 million video accounts, Comcast has 22.4 million, Charter Communications 18.4 million, Dish Network 13.9 million, Verizon 4.7 million accounts.

The other possible surprise is that an overbuilder (typically a service provider competing against both telco and cable) now is in the top-10 rankings.

Rank	Provider	Total Subscribers
1	AT&T	26,000,000
2	Comcast Cable	22,400,000
3	Charter Communications	18,421,145
4	Dish Network	13,909,000
5	Verizon	4,700,000
6	Cox Communications	4,540,280
7	Altice USA	3,948,000
8	Frontier Communications	1,700,000
9	Mediacom	862,000
10	WOW! (f.k.a. WideOpenWest)	702,101
11	Cable One	451,000
12	TPG	377,000
13	Windstream	359,000
14	CenturyLink	311,000
15	Atlantic Broadband Group, LLC	246,000
16	Midcontinent Communications	236,250
17	Armstrong Cable Services	234,573
18	Service Electric Cable TV Incorporated	213,058
19	Metrocast	164,921
20	Blue Ridge Communications	164,796
21	WaveDivision Holdings, LLC	152,975
22	General Communications	140,000
23	Buckeye Broadband	130,954
24	Consolidated Communications	117,882
25	Google Fiber	68,715
26	TDS Telecom	41,200
26	Hawaiian Telcom	32,000

Source: Wikipedia

source: PCmag

Someday 100 Mbps Will Not Qualify as "Broadband"

easonable people will differ about the value of changing the definition of broadband from time to time. When definitions are changed, though, it becomes more difficult to track progress, even if higher minimum definitions are indirect proof that speeds are increasing, across the board.

Three decades ago, in the U.S. market, “broadband” was, by definition, any speed faster than 1.5 Mbps. A decade and a half ago, fiber to the home meant symmetrical 10 Mbps speeds. These days, anything below 25 Mbps is not even “broadband.”

Someday, even 100 Mbps might not be considered “broadband.” It just depends on adoption of speeds in the gigabit range, on both fixed and mobile networks.

source: Arris

source: Arris

Latency Becoming a Bigger Issue than Speed

Despite the fact that consumer Internet access speeds have increased about two orders of magnitude over the last 15 years or so, how much bandwidth any single user “needs” is less clear, with some studies suggesting that, beyond about 10 Mbps to 15 Mbps, users get negligible incremental value.

Eventually that will change as apps are crafted to take advantage of nearly-universal higher speeds. Still, for the moment, gigabit really is about marketing, not end user requirements.

There is one clear exception: multiple users at a single location. As always has been clear for business Internet access connections, the number of users at any single location makes a huge difference, as it is not the amount of typical bandwidth, but the amount of bandwidth per user, on average, that is key.

Some might still argue that advertised headline speeds are a chimera, but studies by the Federal Communications Commission find claims and peak hour speeds are highly correlated, reaching about 97 percent of advertised speeds during peak hours.

The point is that “gigabit” Internet access is, at the moment, more about marketing than it is actual end user requirements. In fact, end user usage limits might now start to be the key issue, not access speed, for many users.

For many other users, latency likely now is becoming the key issue for gaming, 3D video and even web surfing.

Cablevision Launching 200 Mbps, 300 Mbps Internet Access Services?

Despite the big push to launch gigabit Internet access services in the U.S. market, that is only part of the story. Just as important is the boost in speeds at levels below 1,000 Mbps, at price points that many consumers will find compelling, compared to a gigabit offer.

The “101-Mbps” tier presently costs $55 a month, down from about $100 a month in 2009.

Cablevision, for example, appears to be launching new consumer Internet access tiers at 200 Mbps and 300 Mbps, up from the 100-Mbps tier it already offers. Services for business will be launched at 250 Mbps and 350 Mbps.

Optimum Online Ultra 60	$4.95
Optimum Online Ultra 75	$20.00
Optimum Online Ultra 101	$55.00

source: Cablevision

source: DSL Reports

Will U.S. Linear Video Accounts Grow in 2017?

Though customer losses get the headlines, it is net gains or losses for any legacy service that matter, not just the number of customers who drop service.

The reason: though churn matters for any legacy service in a zero-sum market, net account gains or losses matter more.

Consider a recent forecast by cg42 that perhaps 800,000 U.S. customers will drop linear video subscriptions over the next year.

What that same study also suggests is that six percent of survey respondents who never have bought linear video said they are “very or extremely likely” to subscribe to cable in the next 12 months.

If there are about 16.9 million “cord-never” households, that could represent a gain of perhaps one million households. If 800,000 accounts are lost (and not not switched to another provider), it is conceivable that there could be a net gain of about 200,000 accounts.

Linear TV might be a mature product, but its decline remains very slow, with year-over-year account loss of less than one percent, on a net basis.

Spectrum Value Declining?

As essential as licensed spectrum might be for mobile operators, price and quantity still matter, as does the existing amount of spectrum any contestant already has in its possession. In addition, the strategic context also matters.

At least in some markets, planned releases of huge amounts of new spectrum, plus possible sales of surplus spectrum, and use of unlicensed spectrum, now are viewed as viable alternatives--longer term--to acquiring new licensed spectrum at current prices.

In other words, many competitors, in some markets, now might be less willing to pay high prices for 4G or 5G spectrum.

Consider a recent Egyptian government offer to license 4G spectrum available in 2.5-MHz and 5-MHz blocks.

None of the three other Egyptian mobile operators placed a bid, suggesting both that the price was too high, and the amount of spectrum too low.

Vodafone Egypt Telecommunications, Orange Egypt and Etisalat Misr all have twice declined to submit bids.

Only Telecom Egypt, the state-run fixed-line monopoly, did buy a 4G license, purchased to allow it to enter the mobile market for the first time. As a challenger, Telecom Egypt arguably was willing to pay more than the other leading carriers, for a smaller spectrum allocation than would be needed if it is successful, for several reasons.

First, without spectrum it could not enter the market as a facilities-based provider. Also, if Telecom Egypt believes it will have a smaller customer base, then the smaller spectrum allocation might work, for a time.

The GSMA has called for boosting the amount of spectrum available, arguing that the total amount of spectrum assigned to each operator for 4G needs to be in the range of 2x30MHz to 2x60MHz, across a range of coverage and capacity bands, with a minimum contiguous bandwidth of 2x10MHz in each band.

In contrast, only 2×2.5MHz to 2x5MHz were proposed to mobile operators by the Egyptian authorities.

GSMA also argues that the proposed prices were too high as well.

The National Telecom Regulatory Authority now says it will consider options for offering the new licenses to new international operators.

Mediacom Goes Hybrid for HFC Network

In a real sense, a “hybrid” strategy that bridges present and future technologies, business models and services is an effort to harvest a legacy business while laying the foundation for the next business model.

And even when cable TV executives remain confident about scaling their hybrid fiber coax networks to multi-gigabit bandwidth, they also are starting to deploy fiber-to-premises networks to serve business customers.

Mediacom, for example, plans to install gigabit per second Internet access for its consumer customers over the next three years. But Mediacom is using a hybrid physical media strategy.

“We’re actually doing dual cables where we are running both both fiber and coax,” said Dan Templin, Mediacom VP of business services.

The dual fiber and coax drop includes a four-pair fiber and coax in single sheath to address various service configurations that might be required by business customers.

By doing so, Mediacom creates an upgrade path for fiber to customer that does not require additional construction.

Car Makers, Suppliers Form 5G Auto Association

source: Analysys Mason

Audi, BMW Group, Daimler AG, Ericsson, Huawei, Intel, Nokia and Qualcomm have formed the 5G Automotive Association to develop, test and promote communications solutions for connected vehicles, smart cities and intelligent transportation.

Christoph Voigt, BMW Group SVP, is board chairperson and Dino Flore is director general of the association.

source: Business Insider

By 2020, BI Intelligence estimates that 75 percent of cars shipped globally will be built with the necessary hardware to allow people to stream music, look up movie times, be alerted of traffic and weather conditions, and even power driving-assistance services such as self-parking.

Almost by definition, the connectivity of choice will be mobile networks.

Rogers, Shaw Shut Down Streaming Service

Rogers and Shaw Communications have decided to shut down their streaming video service “shomi,” illustrating once again the importance of scale for over-the-top voice, messaging or video services. As has often been the case, services launched by just one operator fail to gain enough scale to compete.

Over the top voice services run by mobile service providers or telcos have had modest success, and much the same is true for carrier messaging services.

The need for scale is one reason some observers believe it is inevitable that Comcast and Charter Communications will look seriously at acquisitions in the U.S. mobile operator market. Neither firm, by itself, has network assets reaching as much as 30 percent of U.S. households.

That implies that national reach, which some would argue now is required for leaders in the mobile market, must be created, one way or the other.

source: Ovum

How Often are you "Amazon First"?

About 55 percent of consumers turn to Amazon first when searching for products online, according to research conducted on behalf of BloomReach. But higher percentages will go straight to Amazon if they already know what they are looking for.

When holiday shoppers know what gift they want, 59 percent will start on Amazon, 24 percent will start on a search engine, and 16 percent will start at a retailer that has that product.

When holiday shoppers don't know what gift to buy, 49 percent will start on Amazon, 28 percent will start on a search engine, and 26 percent will start on a retailer the gift recipient likes.

Those findings make sense. If a person has a problem, but is not sure about the solution, using a search engine--”Google it”--makes sense. But if a person already has chosen a particular solution, then it makes sense to go straight to Amazon.

The "State of Amazon" study, which surveyed 2,000 U.S. consumers, found that search engines and retailers lost almost equal ground, coming in at 28 percent and 16 percent respectively.

Amazon increased its share by 11 percent in one year.

The study also found that mobile devices are driving more than half of all traffic to top sites and has grown to 30 percent of all U.S. e-commerce.

While Amazon (mobile site or app) still commanded 50 percent of consumers' first stop for products on mobile, search engines fared better with 34 percent, with retailers lagging at 16 percent.

Free Basics and Other Sampling Programs Help Solve Both Demand and Supply Issues for Internet Access

Ultimately, demand might be the bigger barrier to ubiquitous Internet usage than supply, even if both supply cost and demand value are key issues in most markets, according to the Phoenix Center for Advanced Legal and Economic Public Policy Studies.

On the supply side, the high cost of infrastructure is the main barrier, suggesting that mobile networks will be the way most people eventually get access to the internet.

Despite differences in the economic fundamentals of nations, the barriers to deployment and adoption are categorically of the same underlying nature.

On the supply side, the lack of access to broadband is mostly a financial issue driven by the high infrastructure costs of network deployment relative to the revenue potential.

On the demand side, awareness and digital literacy as well as affordability are the key issues. “Awareness” means use of Internet apps and services is an experience good.

An experience good is a product for which the value is difficult to ascertain prior to its consumption. One proven way to solve that problem is to allow “sampling” of the product. That is the idea behind Free Basics, the Internet.org initiative that provides access to a suite of apps without requiring that users buy a data plan.

The issue is sustainability: how to balance the use of promotions and sampling with the longer-term goal of generating enough revenue to build and maintain the access networks.

And that is where economics suggests the value of a mix of retail offers, including the sampling programs at low or no cost and other packages that add incremental value for incremental cost.

In other words, “free but limited,” combined with “for fee” packages, contributes to the overall goal of enabling Internet access and use of apps for everyone.

source: Phoenix Center

If Netflix, HBO Go and Hulu are Treated Like Linear Video, Then Zero Rating Should Not be an Issue

The city of Pasadena, Calif. Plans to tax Netflix, HBO Go and Hulu accounts 9.4 percent starting Jan. 1, 2017.

At least 45 other California cities have been advised they too could tax their residents’ online viewing using their city’s existing tax rate for cable providers, at rates ranging from 4.5 percent to 11 percent.

Whatever your views on taxation of over the top Internet services, the move provides one more bit of evidence that traditional regulatory thinking now applies to OTT streaming. Colloquially, that attitude can be termed “if it walks like a duck, and squawks like a duck, it is a duck.”

At least for purposes of taxation, OTT is viewed the same as linear video service. That raises an interesting question, however. If OTT streaming video is the equivalent of linear video, as a type of service, and if linear video rules apply, then zero rating should not be an issue at all.

All linear video services zero rate use of bandwidth. That is why many Internet service providers have argued that managed services are not covered by network neutrality rules.

Managed services are not "Internet services."

AT&T to Speed up Video Life Cycle S Curves

The product life cycle is one fundamental principle multi-product firms must follow. As one product moves towards maturity and eventual decline, another product--earlier in its life cycle--has to be cultivated to replace the maturing product.

The challenge for leading providers of video entertainment services is how to manage the transition.

source: Learn Marketing

source: Innovation Factory

Nobody knows precisely when the slow decline of the linear video business might become non-linear and rapidly decelerate, but AT&T now is acting as though it wants to move faster, even if some might argue linear TV providers can rely on  a relatively long transition period.

To be sure, some 82 percent of U.S. TV households (there are more homes than “TV homes”) subscribe to some form of linear TV service, according to Leichtman Research Group.

The percentage of TV households subscribing to such services is down from 87 percent in 2011, but is declining slowly.

The big unknown is whether the rate of decline remains linear, or becomes non-linear at some point in the future, and when that could happen. AT&T now is acting as though it has to move a little faster.

In the fourth quarter of 2016, AT&T will launch DirecTV Now, an over the top video entertainment product with a heavy mobile or untethered focus, featuring “100-plus premium channels.”

There are a couple angles here. Consider the way AT&T plans to manage bandwidth consumption and pricing, something that, in the mobile realm, has been a challenging barrier, given the cost of mobile bandwidth, compared to fixed networks, and the amount of bandwidth video consumes.

AT&T--significantly--is moving to a traditional media model, not an "Internet" data business model.

“When you buy this content, the data required to stream it on your mobile device is incorporated into the price of the content,” said AT&T CEO Randall Stephenson at an investor conference.

“If you choose to use that in a mobile environment on AT&T your data cost associated with this is incorporated into your content cost,” he said.

There is a precedent for this: broadcast TV, broadcast radio, Sirius XM and cable TV and other linear video services. Or, if you like additional examples, newspapers and magazines that consumers can subscribe to, with delivery cost simply bundled into the price of the subscription.

Media products, in other words, always have featured incorporation of delivery cost into the purchased product price.

To What Extent Does Consumer Video Drive Strategy at AT&T?

Randall Stephenson, AT&T chairman and CEO recently has said  “the consumer is about one thing, it's about video.” Coming from a firm such as AT&T, the comment shows--in large part--what is driving telco consumer services strategy.

Though many questioned AT&T’s acquisition of DirecTV, AT&T argued it had a plan both for wringing immediate and long-term value from the deal. So far, AT&T arguably is showing it is right.

Seen both as a way of creating a nationwide video footprint to match its mobile footprint and a way to create more value from bundling, the deal also was touted as boosting free cash flow needed to support AT&T’s hefty dividend payouts.

Less clear at the time was the way DirecTV would be leveraged to support the next generation of streaming services. AT&T might now be showing it has a plan for transition at scale.

AT&T’s new online streaming video service, DirecTV Now, will become the company’s primary video platform in three to five years, some inside AT&T apparently now predict. The speed of that change--and its implications--show just how much change might be expected in the entertainment video business and the service provider business model.

By switching to over-the-top delivery, AT&T in principle could avoid truck rolls, marketing, in-home capital and other fulfillment cost. DirecTV Now, though primarily aimed mostly at attracting new subscribers among the ranks of consumers disenchanted with linear services, might also eventually appeal even to consumers of facilities-based services that require a physical connection (satellite dish installation or installation of cables and set-tops.

Eliminating a truck roll and customer premises equipment could eliminate several hundreds of dollars of cost whenever a new customer is signed up and activated.

DirecTV Now, set to be introduced by the end of 2016, appears aimed at about 20 million households that have no cable or satellite service, competing with services such as Sling by Dish.

One might argue that DirecTV Now is worth doing if the “unconnected” were the only target. But the benefits might also extend to other consumers who already buy either a fixed network or satellite-delivered linear service.

For AT&T there are trade-offs in other areas, particularly the need to ensure that its access bandwidth assets are plentiful enough to support the big upsurge in bandwidth consumption on mobile and fixed networks.

Nobody knows precisely when the slow decline of the linear video business might become non-linear and rapidly decelerate. AT&T now is acting as though it wants to move faster, even if some might argue linear TV providers can rely on  a relatively long transition period.